Innovation is an important part of staying competitive in any market, and most businesses would say it’s a high priority for their organization. When thought about abstractly, however, it’s hard to imagine how innovation can impact current and future opportunities. In order to better understand how innovation can have a tangible impact, we created this guide to the main types of innovation and how they are commonly implemented.
What Defines Innovation?
Innovation is a process that questions the status quo, locates new solutions, and solves problems for people in a unique way that adds value to their experience. As defined by Ideascale, “Innovation is the process of creating or improving products, services, and processes. Regardless of size, these changes significantly impact how companies serve customers.”
Innovation can be related to a product or service but can also apply to schools of thought, management, and any process people use. The important part is not where it’s applied but how it’s applied; innovation needs to result in sustainable and positive change. This is a required factor for any and all innovation objectives.
Innovation isn’t simple changes, procedural updates, or fixing an existing problem with an existing solution. To innovate is to go above and beyond what currently exists, and in order to do this, organizations need to think differently and act bravely.
What Are the Four Types of Innovation?
In order to understand how innovation occurs, we should break down the different types of innovation. Not all innovation is the same, and depending on the organization or strategy, different types of innovation can have vastly different effects. When thinking about innovation, it’s best to picture an XY quadrant with the Y axis representing Market potential and the X axis representing technology. The graph begins on each axis with the existing experience and moves into new factors that don’t exist. With that understanding, here are the four main types of innovation.
Four Types of Innovation – Made on Fresco
Incremental innovation is the most commonplace type of innovation because it doesn’t alter the product in a significant way but moves it forward slightly. Without any drastic changes, it improves a product, process, or brand and can usually already be seen elsewhere in the ecosystem.
Even if it doesn’t already exist within the ecosystem, it is traditionally an evolution of something that already does and doesn’t really introduce any substantially new concepts. It can be easy to brush incremental innovation to the side because it doesn’t take a radical approach to change, but it’s an incredibly important part of any business. Being able to scan the competitive ecosystem, listen to your customers, and improve consistently to grant a better experience is the foundation of a good business and is a massive factor in building brand loyalty.
Example: Look at any software that you’ve used consistently. Over time, the feature set will grow and evolve to meet increased customer needs. A great example is Slack. They’re constantly adding new features, integrations, and widgets to incrementally innovate their overall experience.
Architectural innovation, sometimes known as sustaining innovation, is when an organization innovates within its business to expand its largest accounts. This type of innovation is essentially taking incremental innovation and scaling it up to make services or products more profitable. There is no expansion into new, unexplored features, but the business will grow internally to meet the extended needs of large clients.
This type of innovation is typically seen in successful companies that are able to greatly expand their reach to existing client needs. Larger organizations often can’t take advantage of quick-moving innovation, so this is a method they use to remain relevant to their customers.
Example: An example of this would be Apple creating new features in their administration console for universities that are partnered with their business. They won’t create a new innovative product or roll out a futuristic interface for the general public, but by increasing their value to a large customer, they are performing architectural innovation.
This type of innovation is what people typically think of when they picture fast-moving innovative initiatives. Radical innovation fundamentally advances the positioning, efficacy, or brand identity of an organization. By utilizing radical innovation, companies can change how they reach customers, how they identify, what they offer, and who they’re targeting.
Radical innovation usually takes an existing market concept and pushes the boundary to find new ways to make the product sing. While it doesn’t open up a never-before-seen market, it takes an existing concept and innovates the technology to make it fresh.
Example: Although it’s not around anymore, Google Stadia was a good example in radical innovation. Gaming was already tremendously popular when Stadia was released, but it operated solely in cloud services and cloud gaming, fundamentally moving the technology forward and making it possible for anyone to access and use cloud gaming services.
Disruptive innovation is the most impactful type of innovation on this list. It occurs when an organization improves on existing market capabilities and pushes its technology forward to create a unique and truly disruptive experience.
This is the most impactful type of innovation for a market and technology, blending innovative initiatives in the two sectors to create something truly special.
Along with being disruptive, these innovations also show the potential to scale up in the future.
Example: Robinhood is a good example of disruptive innovation. It took a traditional market and expanded on it while also adding new technology, allowing people to access and engage with the stock market with increased ease. This was super innovative and saw an influx of companies trying to replicate the same value proposition.
Why Is Innovation Beneficial?
In general, innovation should be involved in every organization at some level. While startups are often inherently innovative, larger organizations might have to make more effort to remain innovative and disruptive. One option would be to hire innovation managers to implement and maintain innovative processes throughout a business. Here are some of the advantages of implementing any or all of the four types of innovation.
- Encourages Creativity: Innovation is a process that requires creativity. People need to think outside the box to find new solutions, and the more an organization does this, the more creative it will become. Encouraging creativity is an important part of keeping employees engaged and helps build problem-solving skills across the board.
- Increases Competitiveness: The different types of innovation force organizations to think about their positioning relative to other companies. When thinking about other companies, businesses are able to better analyze their offering and compete on multiple levels. The four types of innovation give organizations two different metrics to compete on and can enable increased growth in these areas.
- Improves Productivity: Innovation doesn’t just happen externally, and internal innovation can be a key factor in increasing the productivity of internal teams. Whether it’s adopting a new tech stack, approaching workflows differently, or developing new goals, innovation can be a catalyst for increased productivity.
- Focused on Value: The core purpose of innovation is to improve efficiency and add value. Doing these two things, either internally or externally, will always move an organization forward, even if they aren’t a huge success at first. Being able to focus on value-based actions makes growth very direct and provides a positive path forward.
- More Profitable: While increasing value is important, any business will look at profitability as the north star for innovative changes. Increased efficiency and customer value will consequently increase profits for an organization, making innovation a worthwhile investment.
How to Effectively Implement Innovation Structures
Understanding how innovation is helpful is only valuable if you know how to implement it. Implementing innovation structures can take some work, so we’ve listed some quick tips on how to effectively implement innovative initiatives both internally and externally. Depending on a specific innovation strategy, these ideas might be more or less effective, but they should be applicable to most innovative endeavors.
When implementing innovation strategies, it often helps to use an online whiteboard to collaborate. On Fresco, you can collaborate in real time with your entire team and assign tasks internally, so your work leads to real results. Check out Fresco’s free online whiteboard here.
The most important thing to remember when developing an innovation strategy is that everyone needs to be on the same page about where you’re going. When everyone is aligned with the strategy’s goals, they are more engaged in reaching those goals and are also bought into the process. Here are some quick tips to help implement innovation into your business.
- Get everyone involved
- Collaborate regularly
- Create inter-departmental channels of communication
- Reward creativity
- Take examples from successful companies
- Closely track the competitive ecosystem
- Involve your customers
- Empower each individual as a change maker
- Create clear, shared, documented goals
If innovation is something you’re hoping to prioritize, hopefully, this list of the four types of innovation helped clarify your strategy. Keep reading the innovation management blog for more news on the latest trends in innovation.